Budget 2020: Summary and analysis

The first budget since the UK’s departure from the European Union (EU) is here and with it comes a host of implications. The budget 2020 came against a background of a global outbreak of COVID-19: A Novel Coronavirus Strain with deep social and financial ramifications. In the budget the government took note of the effect virus will have on the livelihood and business of its citizens and hence came up with a three-way plan to combat the deadly virus.

Moreover, the government has built on its ambitions of building a fair and sustainable tax system, providing the first-class services, a UK Citizen expects while simultaneously creating an environment for businesses to succeed. The budget 2020 also brought out a plan for investment in R&D and cutting-edge tech while encouraging skill development to keep its citizens competitive to the global economy.

Since the UK also hosts the COP26 UN climate summit this year, the budget 2020 also promised steps to decarbonize the country’s economy and protect its natural habitats, in order to successfully become leaders in the green markets of the future. Lastly, the budget has come up with novel measures and funding for investment in public services, leveling up Britain and supporting people and families at the same time.

Coronavirus and public services

A £5bn emergency response fund to support the National Health Service and other public services in England

All those advised to self-isolate will be entitled to statutory sick pay, even if they have not presented with symptoms

Self-employed workers who are not eligible will be able to claim contributory Employment Support Allowance

The ESA benefit will be available from day one, not after a week as before

£500m hardship fund for councils in England to help the most vulnerable in their areas

Firms with fewer than 250 staff will be refunded for sick pay payments for two weeks, creating some extra payroll and accounting related needs

Small firms will be able to access “business interruption” loans of up to £1.2m

Business rates are planned to be abolished for firms in retail, leisure and hospitality sectors with a rateable value below £51,000

A £6bn NHS funding over five years to pay for the recruitment of staff & hospital upgrades

Personal taxation, wages, and pensions

The tax threshold for National Insurance Contributions expected to rise from £8,632 to £9,500

The move, first announced in November, will take 500,000 employees out of the tax net altogether, creating some relief for the accountants

5% VAT on women’s sanitary products, known as the tampon tax, to be scrapped

The threshold of the tax paid on the pensions of high earners raised to £200,000

Alcohol, tobacco, and fuel

Fuel duty will stay frozen for the 10th year in a row

Duties on spirits, beer, cider and wine to be frozen

Taxes on Tobacco will continue to rise by 2% above the rate of retail price inflation

Business rate discounts for pubs to rise from £1,000 to £5,000 this year, increasing the headache on the pub accountants to keep the books in compliance

Business, digital, and science

System of High Street business rates to be reviewed later this year

Firms eligible for small business rates relief will get £3,000 cash grant

Entrepreneurs’ Relief will be retained, but lifetime allowance will be reduced from £10m to £1m

£5bn to be spent on getting gigabit-capable broadband into the hardest-to-reach places

Science Institute in Weybridge, Surrey to get a £1.4bn funding boost

An extra £900m for research into nuclear fusion, space and electric vehicles

VAT on digital publications, including newspapers, e-books and academic journals to be scrapped from December

Environment and energy

Plastic packaging tax expected to come into force by April 2022. This might bring with itself a sea of bookkeeping measures to be taken so that the businesses that leverage mostly on plastic packaging don’t stand in the way of law

Manufacturers and importers whose products have less than 30% recyclable material will be charged £200 per tonne

Subsidies for fuel used in off-road vehicles – known as red diesel – will be scrapped “for most sectors” in two years’ time inflating the cost of operation of logistic companies that transport goods through rural areas

Red diesel subsidies will remain for farmers and rail operators

£120m in emergency relief for English communities affected by this winter’s flooding and £200m for flood resilience

Total investment to be made for flood defenses in England to be doubled to £5.2bn over the next five years

A £640m “nature for climate fund” to protect natural habitats in England, which includes installation of 30,000 hectares of new trees

Transport, infrastructure, and housing

More than £600bn has been devoted to be spent on roads, rail, broadband, and housing, by the middle of 2025

A fund of £27bn for motorways and other crucial roads, including a tunnel for the A303 near Stonehenge

£2.5bn has been sanctioned to fix potholes and resurface roads over the next five years

Education Colleges to get a fund of £1.5bn to upgrade their buildings

£650m package to tackle homelessness, providing an extra 6,000 places for rough sleepers giving a boost to the construction industry.

A Stamp duty surcharge for foreign buyers of properties to be levied at 2% from April 2021

£1bn fund to remove the unsafe combustible cladding from all public and private housing greater than 18 meters in height

The state of the economy and public finances

The economy is predicted to grow by 1.1%, revised down from the previously promised figure of 1.4%

The figure, which does not take into account the impact of coronavirus, would be the slowest growth since 2009

Growth predicted to rebound to 1.8% in 2021-22, 1.5% in 2022-23 and 1.3% in 2023-24

Inflation is forecasted to increase to 1.8% in 2021-2022. This will create greater needs of Inflation Accounting to factor in the impact soaring or plummeting costs of goods have on International Companies situated in the UK

Government is set to borrow £14.6bn more this year than previously forecast, which is equivalent to 2.1% of GDP

Total additional borrowing of £96.6bn is forecast by 2023-2024 to pay for spending commitments

Debt as a percentage of GDP forecasted to be lower at the end of the current Parliament than now

A surge in borrowing is expected to fund ‘significant’ spending plans

Nations and regions

An extra fund of £640m has been assigned for Scotland, £360m for Wales, and £210m for Northern Ireland

Treasury’s Green Book rules are to be reviewed to factor regional prosperity into spending decisions

Treasury is set to open new offices in Wales and Scotland and a civil service hub in the North of England, employing 750 personnel

A New £1.8bn devolution deal for West Yorkshire, with an elected mayor for the region

Universities outside the southeast of England to get a lion’s share of extra £400m R&D funding

£800m for two carbon capture and storage clusters, creating 6,000 new jobs in Teesside, Humberside, Merseyside, and Scotland

Extra £360m for Welsh services promised in Budget 2020

Devolution deal worth £1.8bn agreed

NI to receive extra £210m for public services

With time only can it be clear, if the implications of this budget 2020 will actually hold fruit. Even in the light of the pandemic, this budget largely delivered on the manifesto’s promises. The increase in borrowing is expected to be huge, Investment Spending is expected to rise sharply and the tax changes promised will be turned into legislation. As far as the implications of Coronavirus go, Mr. Sunak has delivered a masterpiece. Even if there’s significant damage, the contingencies planned are robust and are expected to mitigate the effects largely. It will depend on time only, to witness the ground level implementation of the promises.

Disclaimer:
Please visit gov.co.uk for detailed information. We have tried our best to refer to credible sources and create a summary of accurate data. If you find anything misleading or incorrect please let us know and we will correct it immediately.